Shopify CEO Tobias Lutke, second from left, speaks during a question and answer session following the company's annual general meeting of shareholders in Ottawa in 2019.Justin Tang/The Canadian Press
Shopify Inc. SHOP-T is extending its wave of layoffs while boosting pay for many of its remaining employees amid a restructuring that saw the Ottawa-based e-commerce company shed a tenth of its work force in late July.
About 70 employees have been let go in August, according to three people familiar with the situation. The Globe and Mail is not identifying the sources because they were not authorized to discuss the matter publicly.
Even after accounting for the job cuts in July, the 70 layoffs represent less than 1 per cent of the company’s total work force. But the additional layoffs further highlight Shopify’s sudden reversal of fortune and employment growth in recent years.
Shopify grew from about 5,000 employees and contractors in 2019 to roughly 7,000 in 2020 and about 10,000 as of Dec. 31, 2021, a U.S. Securities and Exchange Commission filing shows. The layoffs this year suggest the company now has about 8,800 workers left globally. (The Globe previously reported it had already let go of at least 50 people before the layoffs in July.)
Barring a sudden rebound in hiring, 2023 will be the first time since the onset of the pandemic that Shopify has started a new year with fewer employees than in the previous year.
In a memo to staff on July 26, which was later made public on the company’s website, chief executive officer Tobias Lutke apologized for overestimating how much e-commerce would grow – a miscalculation that led the company to immediately cut about 1,000 jobs, or 10 per cent of its work force, mostly in the sales, accounting and recruiting departments.
Mr. Lutke said Shopify had hired too many people in order to meet an expected surge in demand, based on figures from the early days of the pandemic. “Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust,” he said at the time. “For a company like ours this news will be difficult to digest.”
Since then, amid a sector-wide slowdown that has clobbered Shopify’s earnings and stock price, the company has quietly made further changes to its work force.
Sources told The Globe that the cuts are designed to focus on Shopify’s core business and make the company leaner overall, reiterating what Mr. Lutke said in his memo to staff: “Across the company, we’re also eliminating over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products.”
They represent a renewed sense of “meritocracy” at Shopify, reminiscent of the company’s early years, before its pandemic boom, whereby employees must routinely prove that they are intrinsic to the tech leader’s mission to drive growth in e-commerce and make Shopify the go-to platform for merchants and creators around the world.
The roughly 70 people laid off in August were provided similar severance packages to those of the employees let go in July: 16 weeks of pay and an extra week for every year they had been with the company, as well as an extension of their medical benefits and outplacement services. They also got to keep their home office furniture.
However, they did have to sign non-disclosure agreements in order to receive their severance packages, the sources said.
Still, there have been rewards and incentives for employees who have proven to be valuable or essential to the company, the three sources said.
Throughout August, most employees either received individual bonuses worth as much as 5 per cent of their salaries or saw their entire team’s compensation rise by as much as 40 per cent per worker, the sources added.
Those sizable increases are separate from the automatic salary bumps of the company’s compensation overhaul, which started being rolled out in August and will fully come into effect in September. It will allow employees to decide how much of their salary is paid in stock and how much in cash, while keeping their base wages the same.
Economic uncertainty stemming from fears of a looming recession, inflation, rising interest rates and the war in Ukraine has weighed heavily on tech valuations and stock prices in 2022, forcing many – such as Wealthsimple, Hootsuite, Article, Swyft and Clearco – to significantly scale back hiring or reduce their work force. Shopify stock traded at all-time highs in November, hitting $222.87 (adjusted for a 10-for-1 stock split in June) on the Toronto Stock Exchange. It has since plummeted almost 80 per cent, closing on Wednesday at $41.58.
One of the sources said Shopify will consider further reductions should profit margins continue to shrink. For now, the company plans to slow hiring for the remainder of 2022 and end the year with a smaller head count, the source added.
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